Loan Agreement - Applied Analytical Industries Inc. and NationsBank of North Carolina NA
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of December 21, 1992 (the "Loan
Agreement"), is by and between
APPLIED ANALYTICAL INDUSTRIES, INC., a corporation organized and
existing under the laws of the State of Delaware and having its principal place
of business in Wilmington, North Carolina (the "Borrower"); and
NATIONSBANK OF NORTH CAROLINA, N.A., a national banking association
organized and existing under the laws of the United States and having offices
in Wilmington, North Carolina (the "Bank").
RECITALS
A. The Borrower has requested that the Bank provide credit
facilities of up to $8,100,000.00 for the purposes described herein.
B. The Bank has agreed to provide the requested credit facilities
to the Borrower on the terms and conditions hereinafter set forth.
C. The Borrower may also request additional credit facilities
from the Bank subsequent to the date hereof. If extended, the Borrower and the
Bank agree that such additional credit facilities shall be governed by the
terms of this Loan Agreement.
NOW, THEREFORE, the Borrower and the Bank agree as follows:
ARTICLE I
DEFINITIONS
1.1 For the purposes hereof:
"Additional Loan" means any Loan made pursuant to Section 6.1
hereof;
"Additional Note" means any promissory note of the Borrower
executed and delivered as provided in Section 6.1 hereof;
"Aircraft Loan" means the Loan made pursuant to Section 5.1
hereof;
"Aircraft Note" means the promissory note of the Borrower
executed and delivered as provided in Section 5.2 hereof;
"Aircraft Security Agreement" means that certain security
agreement to be executed by the Borrower and the Bank on the date of
the making of the Aircraft Loan pursuant to which the Borrower grants
the Bank a security interest on the aircraft to be financed with
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the proceeds of the Aircraft Loan for purposes of securing the
Borrower's obligation to repay the Loans;
"Autoborrowing Documentation" shall have the meaning given to
such term in Section 2.5 hereof;
"Autoborrowing Loans" shall have the meaning given to such
term in Section 2.5 hereof;
"Autoborrowing Note" shall have the meaning given to such term
in Section 2.5 hereof;
"Borrowing Base" means eighty percent (80%) of the Receivables
Base;
"Business Day" means any day not a Saturday, Sunday or legal
holiday on which the Bank is open for business in Wilmington, North
Carolina;
"Capital Base" means the sum of Tangible Net Worth and
Subordinated Debt;
"Capital Expenditures Loan" means a Loan made pursuant to
Section 4.1 hereof;
"Capital Expenditures Note" means the promissory note of the
Borrower executed and delivered as provided in Section 4.2 hereof;
"Capital Expenditures Loan Committed Amount" means the maximum
principal amount of Capital Expenditures Loans permitted to be
outstanding under Section4.1;
"Capital Expenditures Loan Maturity Date" means May 31, 1994;
"Cash Flow" means, for the twelve (12) month period ending on
the date of computation: net income of the Borrower (i) plus
depreciation, amortization and other non-cash charges, (ii) minus an
amount equal to unfinanced capital expenditures and (iii) minus
dividends declared or paid or redemptions of stock or other
distributions of cash or property to shareholders of the Borrower;
"Closing Date" means the date as of which this Loan Agreement
is executed by the Borrower and the Bank;
"Commitment" means the commitment by the Bank to make Loans to
the Borrower hereunder;
"Consistent Basis" in reference to the application of
Generally Accepted Accounting Principles, means that the accounting
principles observed in the period referred to are comparable in all
material respects to those applied in the most recent preceding period;
"Coverage Ratio" means as of any date of computation, the
ratio of Cash Flow to Debt Service;
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"Current Assets" means all items which, in accordance with
Generally Accepted Accounting Principles, would be classified as
current assets on a balance sheet of the Borrower;
"Current Liabilities" means all items which, in accordance
with Generally Accepted Accounting Principles, would be classified as
current liabilities on a balance sheet of the Borrower;
"Current Ratio" means the ratio of Current Assets to Current
Liabilities;
"Debt Service" means the sum of (i) current maturities of Long
Term Debt for the twelve month period beginning on the computation
date, (ii) 1/8th of the average outstanding principal balance of the
Revolving Loans for the twelve month period ending on the computation
date, (iii) 1/5th of the outstanding balance of the Capital
Expenditures Loans on the computation date and (iv) proposed payments
of Subordinated Debt for the twelve month period beginning on the
computation date;
"Deed of Trust" means the deed of trust dated as of the
Closing Date executed by the Borrower for the benefit of the Bank (i)
granting the Bank a first lien on the Borrower's CSD building, daycare
building and Kerr Avenue building and (ii) granting the Bank a second
lien on the Borrower's AAI building and Hall Street buildings;
"Event of Default" shall have the meaning given to said term
in Section 11.1 hereof;
"Excess Cash Flow" means as of any date of computation, the
amount by which Cash Flow exceeds Debt Service;
"Financing Statements" means the UCC-1 financing statements to
be filed in order to perfect the Bank's security interests in certain
personal property and fixtures as more particularly described therein;
"Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants, as such principles are from time to time supplemented and
amended;
"Guarantors" means Frederick D. Sancilio and James L. Waters;
"Guaranty Agreement" means the guaranty agreement executed by
the Guarantors in favor of the Bank pursuant to which the Guarantors
guarantee the repayment of the Loans;
"Loan" or "Loans" means the loans made pursuant to Sections
2.1, 3.1, 4.1, 5.1 and 6.1 hereof;
"Loan Documents" means this Loan Agreement, the Notes, the Deed
of Trust, the Security Agreement, the Aircraft Security Agreement and
the Financing Statements;
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"Long Term Debt" means all indebtedness for borrowed money of
the Borrower which in accordance with Generally Accepted Accounting
Principles would be classified as long term debt, but including in any
event the current portions of such long term debt and leases required
to be capitalized in accordance with Generally Accepted Accounting
Principles, but excluding in any event Subordinated Debt;
"Note" or "Notes" means the promissory notes of the Borrower,
executed, and delivered as provided in Sections 2.2, 3.2, 4.2, 5.2 and
6.1 hereof;
"Person" means an individual, a corporation, a partnership, a
joint venture, an association, a joint stock company, a trust, an
unincorporated organization or a government or any agency or political
subdivision thereof;
"Prime Rate" means the rate of interest publicly announced by
the Bank in Charlotte, North Carolina from time to time as its "prime
rate." The Prime Rate is not necessarily the best or lowest rate of
interest offered by the Bank;
"Receivables Base" means an amount equal to the aggregate book
value of all billed receivables of the Borrower from the sale of
inventory or the rendering of services (excluding in any case
intercompany receivables owed by any Subsidiary or Affiliate) which are
no more than 90 days after the invoice date; provided, that in no event
shall any receivable be included in the Receivable Base unless such
receivable is free and clear of all liens and encumbrances, except
liens and encumbrances permitted hereunder;
"Revolving Loan" means a Loan made pursuant to Section 2.1
hereof;
"Revolving Note" means the promissory note of the Borrower
executed and delivered as provided in Section 2.2 hereof;
"Revolving Loan Committed Amount" means the maximum principal
amount of Revolving Loans permitted to be outstanding under Section
2.1;
"Revolving Loan Maturity Date" means May 31, 1994;
"Security Agreement" means that security agreement dated as of
the Closing Date by and between the Borrower and the Bank whereby the
Borrower grants the Bank (i) a first priority security interest in the
Borrower's now owned or hereafter acquired accounts receivable and
inventory and (ii) grants the Bank a first priority security interest
in the Borrower's now owned or hereafter acquired machinery,
equipment, leasehold improvements, furniture, office furnishings,
vehicles and fixtures;
"Subordinated debt" means indebtedness of the Borrower
subordinated to the obligations of the Borrower to the Bank on such
terms and conditions as accepted in writing by the Bank;
"Subsidiary" means any corporation more than 50% of the
outstanding voting stock of which at the time is owned directly or
indirectly by the Borrower and/or by one of more Subsidiaries;
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"Tangible Net Worth" shall mean the aggregate amount of assets
shown on the balance sheet of the Borrower at any particular date (but
excluding from such assets capitalized organization and development
costs, capitalized interest, debt discount and expense, goodwill,
patents, trademarks, copyrights, franchises, licenses, amounts due
from officers, directors, stockholders and affiliates, and such other
assets as are properly classified intangible assets under Generally
Accepted Accounting Principles) less liabilities at such date, all
computed in accordance with Generally Accepted Accounting Principles;
"Term Loan" means a Loan made pursuant to Section 3.1 hereof;
"Term Loan Committed Amount" means the maximum principal
amount of Term Loans permitted to be outstanding under Section 3.1;
"Term Loan Maturity Date" means December 31, 1997; and
"Term Note" means the promissory note of the Borrower executed
and delivered as provided in Section 3.2 hereof.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis.
ARTICLE II
REVOLVING LOANS
2.1 Revolving Loans. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, the Bank
agrees to make Revolving Loans to the Borrower, at any time or from time to
time on or after the date hereof and until the Revolving Loan Maturity Date, in
an aggregate principal amount at any time outstanding not to exceed TWO MILLION
DOLLARS ($2,000,000.00) (the "Revolving Loan Committed Amount") for purposes of
financing the Borrower's working capital needs. The Borrower may borrow, repay
and reborrow hereunder on or after the date hereof and prior to the Revolving
Loan Maturity Date, subject to the terms, provisions and limitations set forth
herein.
2.2 Revolving Note. The Revolving Loans by the Bank shall be
evidenced by the Revolving Note duly executed by the Borrower, dated the
Closing Date, in substantially the form of Exhibit A attached hereto, payable
to the order of the Bank in a principal amount equal to the Revolving Loan
Committed Amount. The Revolving Note shall bear interest from its date on the
outstanding principal balance thereof as set forth in Section 2.3 hereof. The
aggregate unpaid principal amount of the Revolving Loans at any time shall be
the principal amount owing on the Revolving Note at such time. The principal
amount of the Revolving Loans, as evidenced by the Revolving Note, shall be
payable on the Revolving Loan Maturity Date and all accrued and unpaid interest
thereon, shall, subject to the provisions hereof, be payable monthly in arrears
on the tenth day of each month commencing January 10, 1993.
2.3 Interest. The outstanding principal balance of the Revolving
Loans shall bear interest at a rate equal to the Prime Rate plus three-quarters
percent (3/4%) per annum. Changes in the Prime Rate shall be effective on the
dates such rate change.
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2.4 Borrowing Base Limitation.
(a) The principal amount of the Revolving Loans
outstanding under this Article II at any time shall not exceed the
Borrowing Base.
(b) If at any time the outstanding principal balance of
the Revolving Loans exceeds the Borrowing Base, the Borrower shall
immediately pay the Bank an amount equal to such excess.
2.5 Autoborrowings. The Bank has agreed to make autoborrowing
loans (the "Autoborrowing Loans") to the Borrower from time to time pursuant to
the terms of that certain autoborrowing note executed by the Borrower in favor
of the Bank (hereinafter such autoborrowing note together with all notes
executed in modification or replacement thereto shall be referred to as the
"Autoborrowing Note") and related documentation (hereinafter the Autoborrowing
Note together with such related documentation shall be referred to as the
"Autoborrowing Documentation"). The Borrower hereby acknowledges and agrees
that the making by the Bank of an Autoborrowing Loan shall constitute usage by
the Borrower of the Revolving Loan Committed Amount thereby decreasing the
availability to the Borrower of Revolving Loans hereunder to the extent of the
outstanding principal balance of such Autoborrowing Loans from time to time.
The Borrower also acknowledges and agrees that the Bank shall be entitled to
disburse proceeds of the Revolving Loans to itself for purposes of repaying
amounts borrowed under the Autoborrowing Note.
ARTICLE III
TERM LOANS
3.1 Term Loans. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, the Bank agrees to
make Term Loans to the Borrower, at any time or from time to time on or after
the date hereof and until the Term Loan Maturity Date, in an aggregate
principal amount at any time outstanding not to exceed FOUR MILLION ONE HUNDRED
THOUSAND DOLLARS ($4,100,000.00) (the "Term Loan Committed Amount"); provided,
however, the Term Loan Committed Amount shall be reduced by an amount equal to
$102,500.00 at the end of each quarter commencing March 31, 1993. The Borrower
may borrow, repay and reborrow hereunder on or after the date hereof and prior
to the Term Loan Maturity Date, subject to the terms, provisions and
limitations set forth herein. The proceeds of the Term Loans shall be used to
fund up to $4,100,000.00 of the purposes previously disclosed to the Bank.
3.2 Term Note. The Term Loans by the Bank shall be evidenced by
the Term Note duly executed by the Borrower, dated the Closing Date, in
substantially the form of Exhibit B attached hereto, payable to the order of
the Bank in a principal amount equal to the Term Loan Committed Amount. The
Term Note shall bear interest from its date on the outstanding principal
balance thereof as set forth in Section 3.3 hereof. The aggregate unpaid
principal amount of the Term Loans at any time shall be the principal amount
owing on the Term Note at such time. The principal amount of the Term Loans,
as evidenced by the Term Note, shall be payable in sixty consecutive monthly
installments, the first 59 of which shall be in an amount equal to $34,167.00
and the 60th of which shall be in an amount equal to the then outstanding
principal balance of the Term Loans. Such installments shall be due and
payable on the tenth day of each month commencing January 10, 1993. All
accrued and unpaid interest on the Term Note
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shall, subject to the provisions hereof, be payable monthly in arrears on the
tenth day of each month commencing January 10, 1993.
3.3 Interest. The outstanding principal balance of the Term Loans
shall bear interest at a rate equal to the Prime Rate plus three-quarters
percent (3/4%) per annum. Changes in the Prime Rate shall be effective on the
dates such rates change.
3.4 Borrowing Limitation.
(a) The principal amount of the Term Loans outstanding
under this Article III at any time shall not exceed the Term Loan
Committed Amount, as such Term Loan Committed Amount is reduced from
time to time pursuant to Section 3.1 hereof.
(b) If at any time the outstanding principal balance of
the Term Loans exceeds the Term Loan Committed Amount, as such Term
Loan Committed Amount is reduced from time to time pursuant to Section
3.1 hereof, the Borrower shall immediately pay the Bank an amount
equal to such excess.
ARTICLE IV
CAPITAL EXPENDITURES LOANS
4.1 Capital Expenditures Loans. Subject to the terms and
conditions and relying upon the representations and warranties herein set
forth, the Bank agrees to make Capital Expenditures Loans to the Borrower, at
any time or from time to time on or after the date hereof and until the Capital
Expenditures Loan Maturity Date, in an aggregate principal amount up to ONE
MILLION DOLLARS ($1,000,000.00) (the "Capital Expenditures Loan Committed
Amount") for purposes of financing capital expenditures to be made by the
Borrower; provided, however, the amount of any Capital Expenditures Loan shall
not exceed 80% of the cost of the capital asset being acquired. The Borrower
may borrow on or after the date hereof and prior to the Capital Expenditures
Loan Maturity Date up to a cumulative amount of $1,000,000.00, subject to the
terms, provisions and limitations set forth herein.
4.2 Capital Expenditures Note. The Capital Expenditures Loans by
the Bank shall be evidenced by the Capital Expenditures Note duly executed by
the Borrower, dated the Closing Date, in substantially the form of Exhibit C
attached hereto, payable to the order of the Bank in a principal amount equal
to the Capital Expenditures Loan Committed Amount. The Capital Expenditures
Note shall bear interest from its date on the outstanding principal balance
thereof as set forth in Section 4.3 hereof. The aggregate unpaid principal
amount of the Capital Expenditures Loans at any time shall be the principal
amount owing on the Capital Expenditures Note at such time. The principal
amount of the Capital Expenditures Loans outstanding as of the Capital
Expenditures Loan Maturity Date shall be payable on the Capital Expenditures
Loan Maturity Date. All accrued and unpaid interest under the Capital
Expenditures Note, shall, subject to the provisions hereof, be payable monthly
in arrears on the tenth day of each month commencing January 10, 1993.
4.3 Interest. The outstanding principal balance of the Capital
Expenditures Loans shall bear interest at a rate equal to the Prime Rate plus
one percent (1%) per annum. Changes in the Prime Rate shall be effective on
the dates such rate change.
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ARTICLE V
AIRCRAFT LOAN
5.1 Aircraft Loan. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, the Bank
agrees to make a loan to the Borrower for the purpose of financing the
acquisition by the Borrower of an aircraft in an amount equal to the lesser of
(a) ONE MILLION DOLLARS ($1,000,000.00) or (b) 80% of the lesser of (i) the
cost of such aircraft or (ii) the appraised value of the aircraft, such
appraisal to be in form and substance satisfactory to the Bank. The funding of
the Aircraft Loan shall be contingent upon the continued satisfactory
performance of the Borrower (as determined by the Bank), the receipt by the
Bank of the Borrower's December 31, 1992 audited financial statements and the
compliance by the Borrower with the terms and provisions of this Loan
Agreement.
5.2 Aircraft Loan Note. The Aircraft Loan shall be evidenced by
an Aircraft Note duly executed on behalf of the Borrower, dated as of the date
of the making of the Aircraft Loan, payable to the order of the Bank in the
principal amount of the Aircraft Loan. All of the terms and provisions of the
Aircraft Loan (including repayment terms and interest rate) shall be negotiated
between the Borrower and the Bank. All such terms must be satisfactory to the
Bank. If any of such terms are not satisfactory to the Bank or if the Borrower
has not satisfied any other conditions imposed by the Bank with respect to the
making of the Aircraft Loan, the Bank shall not be obligated to make the
Aircraft Loan.
ARTICLE VI
ADDITIONAL LOANS
6.1 Additional Loans. The Borrower may request that the Bank make
additional loans to the Borrower subsequent to the date hereof. The terms of
such additional loans must be mutually agreed upon by the Borrower and the Bank
prior to the making of such loans by the Bank. Such additional loans will be
evidenced by promissory notes executed by the Borrower in favor of the Bank.
Such promissory notes will be deemed to be "Notes" for purposes of this Loan
Agreement automatically upon the execution thereof without any further action
to be taken by the Borrower or the Bank.
ARTICLE VII
ADDITIONAL PROVISIONS REGARDING LOANS
7.1 Default Rate. If the Borrower shall default in the payment
when due (subject to applicable grace periods, if any) of the principal of or
interest on any Loan or any other amount becoming due hereunder, the Borrower
shall on demand from time to time pay interest on any overdue payment of
principal and, to the extent permitted by law, on overdue payments of interest
up to the date of actual payment (after as well as before judgment):
(i) in the case of principal of or interest on a Loan at a
rate equal to 2% per annum above the rate which would otherwise be
payable hereunder; and
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(ii) in the case of any other amount payable hereunder or
under any of the other Loan Documents (other than principal of or
interest on any Loan referred to in clause (i) above), at a rate 2% per
annum above the Prime Rate.
7.2 Voluntary Prepayments. Subject to the prepayment penalty with
respect to the Term Loan set forth below, the Borrower shall have the right at
any time and from time to time to prepay any Loan in whole or in part, without
premium or penalty, upon at least one Business Day's notice to the Bank;
provided, however, partial prepayments of any Loan shall be applied to
principal installments thereunder in the inverse order of maturities.
7.3 Capital Adequacy.
(a) In the event that the Bank shall have determined that
the adoption or implementation on or after the Closing Date of any
applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof or by any court, or compliance by the Bank (or any lending
office of the Bank) with any request or directive made or issued after
the Closing Date regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on the
Bank's capital as a consequence of its obligations hereunder to a level
below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies as
the case may be, with respect to capital adequacy) by an amount deemed
by the Bank to be material, then from time to time the Borrower shall
pay to the Bank such additional amount or amounts as will compensate
the Bank for any such reduction suffered.
(b) Failure on the part of the Bank to demand compensation
for any reduction in return on capital with respect to any period shall
not constitute a waiver of the Bank's rights to demand compensation for
any reduction in return on capital in such period or in any other
period. The protection of this Section shall be available to the Bank
regardless of any possible contention of invalidity or inapplicability
of the law, regulation or condition which shall have been imposed.
7.4 Fee. The Borrower agrees to pay the Bank a fee on the Closing
Date in the amount of $15,000.00.
ARTICLE VIII
CONDITIONS OF LENDING
The obligation of the Bank to make any Loan hereunder is subject to the
accuracy, as of the date thereof, of the representations and warranties
contained in Article IX hereof, to the performance by the Borrower of its
obligations to be performed hereunder on or before the date of each such Loan
and to the satisfaction of the following further conditions:
8.1 Conditions. In the case of each Loan to be made hereunder, at
the time of each such borrowing, the Borrower shall be in compliance in all
material respects with all the terms and provisions set forth herein on its
part to be observed or performed, and immediately after such borrowing no Event
of
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Default nor any event which upon notice or lapse of time or both would
constitute such an Event of Default shall have occurred and be continuing.
8.2 Borrowing Base Limitation. In the case of each Revolving Loan
to be made hereunder, immediately after giving effect to such Revolving Loan,
the aggregate principal balance of all outstanding Revolving Loans shall not
exceed the lesser of (i) the Revolving Loan Committed Amount or (ii) the
Borrowing Base.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Bank that:
9.1 Corporate Existence and Power. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and in good standing as a foreign
corporation authorized to do business in every jurisdiction where the failure
to so qualify would have a material adverse effect on the Borrower. Further,
the Borrower has all power and authority to own and operate its properties and
to carry on its business as now conducted.
9.2 Authorization of Loan Agreement. The Borrower has the power and
authority to enter into this Loan Agreement and to perform its obligations
under and consummate the transactions contemplated by this Loan Agreement and
has by proper corporate action duly authorized the execution and delivery of
this Loan Agreement. When executed and delivered, this Loan Agreement and the
other Loan Documents will be valid and binding obligations of the Borrower
enforceable in accordance with their respective terms.
9.3 No Violation of Corporate Restrictions. Neither the execution
and delivery of this Loan Agreement, nor the performance of the obligations
under or consummation of the transactions contemplated by this Loan Agreement,
violates or will violate any law or governmental order, conflicts or will
conflict with any provision of any charter document or by-law of the Borrower
or any material term or provision of any agreement or instrument to which the
Borrower is a party or by which the Borrower is bound, or constitutes or will
constitute a breach of or a default under any such agreement or instrument
(unless appropriate written waivers have been received and delivered to the
Bank).
9.4 Governmental Consents. No consent, approval or authorization
of, or filing, registration or qualification with, any governmental authority
on the part of the Borrower is required as a condition to the execution,
delivery or performance of this Loan Agreement or any of the other Loan
Documents by the Borrower.
9.5 Litigation. There are no material pending, or to the best
knowledge of Borrower, threatened, legal proceedings to which the Borrower is a
party or of which any of its properties are the subject.
9.6 Other Agreements. The Borrower is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material agreement or instrument to which it is a
party.
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9.7 Taxes. The Borrower has filed or caused to be filed all
federal, state and local tax returns which are required to be filed by the
Borrower and has paid or caused to be paid all taxes as shown on said returns
or on any assessment to the extent such taxes have become due, except for taxes
which are being contested in good faith and against which reserves in
accordance with Generally Accepted Accounting Principles will be established.
The Borrower does not know of any proposed material tax assessments against it.
No extension of time for assessment or payment of any federal, state or local
tax by the Borrower is in effect.
9.8 Liens. None of the assets of the Borrower is subject to any
mortgage, pledge, title retention lien or other lien, encumbrance or security
interest, except (i) for current taxes not delinquent or taxes being contested
in good faith and by appropriate proceedings, (ii) liens arising in the
ordinary course of business for sums not due or sums being contested in good
faith and by appropriate proceedings, but not involving any borrowed money or
the deferred purchase price of property or services, (iii) mechanics' and
materialmen's liens, reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions, leases and other similar title
exceptions or encumbrances affecting real property which do not in the
aggregate materially detract from the value of said properties or materially
interfere with their use in the ordinary conduct of the Borrower's business and
(iv) to the extent shown in Exhibit D.
9.9 ERISA. The Borrower has not incurred any accumulated unfunded
deficiency within the meaning of the Employee Retirement Income Security Act of
1974 ("ERISA") nor has incurred any material liability to the Pension Benefit
Guaranty Corporation ("PBGC") established under such Act (or any successor
thereto under such Act) in connection with the employee benefit plan
established or maintained by the Borrower. The Borrower is in compliance in
all material respects with those provisions of ERISA and the regulations and
public interpretations thereunder which are applicable to the Borrower and its
Subsidiaries. No Reportable Event (as defined in ERISA) has occurred with
respect to any Plan.
9.10 Subsidiaries. The Borrower has no Subsidiaries as of the date
hereof except for Applied Analytical Industries Italy S.r.l. in Milan, Italy.
9.11 Regulation U. The Borrower is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System).
9.12 Patents and Trademarks. The Borrower possesses all of the
necessary patents, licenses, trademarks, trademark rights, tradenames,
tradename rights and copyrights material to conduct its business as now
conducted, without known conflict with any patent, license, trademark,
tradename or copyright of any other Person.
9.13 Financial Information Provided. The Borrower represents that
the financial information it has heretofore furnished to the Bank dated
December 31, 1991 with regard to its operations is true and correct, and
presents fairly the financial position of the Borrower, and there have been no
material adverse changes since that date.
9.14 Environmental Compliance. The Borrower has fully complied with
all laws, ordinances, regulations and orders, including without limitation all
zoning, safety and environmental laws, ordinances, regulations and orders,
applicable to its business or properties and the present uses by the Borrower
of its properties do not violate any such laws, ordinances, regulations or
orders. There is not currently and in the past there has not been (i) any use,
treatment, storage or disposal of any hazardous substance or material
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or pollutant on any of the Borrower's properties, except as of the date hereof
as disclosed on Exhibit E attached hereto, (ii) any spill, leakage, discharge
or release of any hazardous substance or material or pollutant thereon or
therefrom, or (iii) any off-site disposal by the Borrower of any hazardous
substance or material or pollutant in any location, except as disclosed on
Exhibit E attached hereto.
ARTICLE X
AFFIRMATIVE COVENANTS
10.1 The Borrower agrees that as long as its obligations hereunder
remain outstanding and until the Commitment hereunder is terminated (unless the
Bank shall otherwise consent in writing):
(a) within one hundred twenty (120) days of the end of each
fiscal year, deliver to the Bank a detailed financial report of the
Borrower based on Generally Accepted Accounting Principles applied on a
Consistent Basis containing an unqualified opinion of independent
certified public accountants acceptable to the Bank;
(b) within thirty (30) days after the end of each month of
each fiscal year, deliver financial information and reports as of the
end of such month (including financial statements, receivables agings
and payables agings) of the Borrower certified by the chief financial
officer of the Borrower to be correct and accurate;
(c) (i) on or before the second business day of each week a
report substantially in the form of Exhibit F on the Borrowing Base and
its components as at the end of the preceding week certified by the
chief financial officer to be correct and accurate;
(d) together with each delivery of financial reports
required by Section 10.1(a) and (b) hereof, deliver to the Bank a
statement signed by the chief financial officer of the Borrower
substantially in the form of Exhibit G hereto, setting forth that the
Borrower has kept, observed, performed and fulfilled each and every
agreement binding on it contained in this Loan Agreement and the Loan
Documents and is not at the time in default in the keeping, observance,
performance or fulfillment of any of the terms, provisions and
conditions of this Loan Agreement or any of the Loan Documents and that
no Event of Default specified in Article XII hereof, nor any event,
which, upon notice or lapse of time or both, would constitute such an
Event of Default, has occurred, or if such Event of Default exists or
would occur as the case may be, stating the nature thereof, the period
of existence thereof and what action the Borrower proposes to take with
respect thereto;
(e) promptly, from time to time, deliver to the Bank such
other information regarding the Borrower's operations, business affairs
and financial condition as the Bank may reasonably request. The Bank
is hereby authorized to deliver a copy of any such financial
information delivered hereunder to the Bank to any regulatory authority
having jurisdiction over the Bank with appropriate confidential
restrictions being noted on any submissions of such information;
(f) maintain or cause to be maintained all personal property
material to its business in good working order and condition and make
all needed repairs, replacements and renewals as are necessary to
conduct its business in accordance with prudent business practices;
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<PAGE> 13
(g) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and
franchises;
(h)(i) comply with or contest in good faith all statutes and
governmental regulations of which the Borrower has knowledge and the
noncompliance of which would have a material adverse effect on the
financial condition of the Borrower; and (ii) pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, might become a lien against any
of its properties except liabilities being contested in good faith and
against which, if reasonably requested by the Bank, reserves
satisfactory to the Bank will be established;
(i) at all times keep its insurable properties insured to
such extent and against such risks, including, without limitation,
public liability insurance, hazard insurance, worker's compensation and
other insurance required by law, as is acceptable to the Bank and is
customary with companies of comparable size in the same or similar
business but at all times of the type and at least in the amount of the
present coverage of the Borrower. The Borrower will deliver to the
Bank certificates of each insurer evidencing the hazard insurance
coverage regarding the security granted to the Bank by the Borrower.
Each such policy of hazard insurance will require, and the certificates
will state that no such policy will be terminated without at least
thirty (30) days prior written notice having been delivered to the
Bank. Insurance proceeds from property securing the indebtedness
hereunder shall be immediately applied to reduce such indebtedness;
provided, however, insurance proceeds of less than $100,000.00 may be
disbursed to the Borrower for restoration or repair so long as no Event
of Default shall have occurred or be continuing;
(j) preserve and protect its patents, licenses trademarks,
trademark rights, tradenames, tradename rights and copyrights and
maintain all of its other material properties and assets used or useful
in the conduct of its business in good repair, working order and
condition and from time to time cause to be made all proper
replacements, betterments and improvements thereto;
(k) keep true books of records and accounts in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis, and in which full, true and correct entries will be made of the
Borrower's dealings and transactions;
(l) permit any officer of the Bank designated by the Bank to
visit and inspect any of the Borrower's properties, books and financial
records at such times as the Bank may reasonably request upon
reasonable notice and during ordinary business hours;
(m) upon the request of the Bank, authorize any officer of
the Bank to discuss its financial statements and financial affairs at
any time and from time to time with the Borrower's independent
certified public accountants upon reasonable notice and during ordinary
business hours;
(n) deliver to the Bank forthwith, upon any officer of the
Borrower obtaining knowledge of an Event of Default or an event which
would constitute such an Event of Default but for the requirement that
notice be given or time elapse or both, a certificate signed by the
chief executive officer of the Borrower specifying the nature and
period of existence thereof and what action the Borrower proposes to
take with respect thereto;
(o) within ten (10) days of the event becoming known to any
officer of the Borrower, notify the Bank in writing of the occurrence
of any of the following events:
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<PAGE> 14
(i) the pendency or commencement of any action, suit
or proceeding at law or in equity under which a party or parties
seek an amount equal to or exceeding $50,000.00;
(ii) any event or condition which shall constitute an
event of default under any other agreement for borrowed money or
any known or potential materially adverse change in any other
material contractual agreement;
(iii) any levy of an attachment, execution or other
process against its assets; and
(iv) any change in any existing agreement or contract
which may materially adversely affect any of its businesses or
affairs, financial or otherwise;
(p) the Borrower shall (i) at all times, make prompt payment
of all contributions required under all employee benefit plans
("Plans") to meet the minimum funding standard set forth in ERISA
(defined herein) with respect to its Plans; (ii) within thirty (30)
days after the filing thereof, furnish to the Bank copies of each
annual report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or
the Internal Revenue Service pursuant to ERISA, and the regulations
promulgated thereunder, in connection with each of its Plans for each
Plan Year; (iii) notify the Bank immediately of any fact, including,
but not limited to, any Reportable Event (as defined in ERISA) arising
in connection with any of its Plans, which might constitute grounds for
termination thereof by the PBGC or for, the appointment by the
appropriate United States District Court of a trustee to administer
such Plan, together with a statement, if requested by the Bank, as to
the reason therefor and the action, if any, proposed to be taken with
respect thereof; and (iv) furnish to the Bank, upon its request, such
additional information concerning any of the Borrower's Plans as may be
reasonably requested;
(q) satisfy the following financial tests (all computed
using historical cost basis statements):
(i) the Borrower will maintain as of the end of each
fiscal quarter (commencing with the fiscal quarter ending
December 31, 1992) a Capital Base of not less than
$4,000,000.00; provided, however, such amount shall be increased
on the last day of each fiscal year (commencing with the fiscal
year ending December 31, 1993) by an amount equal to the greater
of $750,000.00 or 40% of the net income of the Borrower for the
fiscal year then ending, such increases to be cumulative;
(ii) the Borrower shall maintain at all times a
Current Ratio of not less than 1.25 to 1.00;
(iii) the Borrower shall maintain a Coverage Ratio of
not less than 1.15 to 1.0 computed on the last day of each
fiscal quarter commencing with the fiscal quarter ending
December 31, 1992; and
(iv) the Borrower shall maintain a ratio of Total
Liabilities less Subordinated Debt to Capital Base of not
greater than (A) 2.5 to 1.0 at all times during the period
commencing on the Closing Date through and including December
30, 1993 and (B) 2.0 to 1.0 at all times thereafter.
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<PAGE> 15
ARTICLE XI
NEGATIVE COVENANTS
11.1 The Borrower agrees that as long as its obligations hereunder
remain outstanding and until the Commitment is terminated (unless the Bank
shall otherwise consent in writing):
(a) incur, create, assume or permit to exist any
indebtedness for borrowed money, howsoever evidenced, or its equivalent
(including but not limited to leases required to be capitalized under
Generally Accepted Accounting Principles), except
(i) indebtedness set forth in the financial
statements referred to in Section 9.13 hereof and as set forth
in Exhibit H;
(ii) additional indebtedness extended by the Bank;
(iii) Subordinated Debt; and
(iv) purchase money indebtedness incurred to finance
the acquisition of equipment provided that (a) the aggregate
amount of such purchase money indebtedness incurred by the
Borrower at any time outstanding does not exceed $100,000.00,
and (b) the initial maturity of each item of such purchase money
indebtedness is at least three (3) years;
(b) incur, create or permit to exist any pledge, lien,
charge or other encumbrance of any nature whatsoever on the Borrower's
property, whether now owned or hereafter acquired, other than
(i) liens as disclosed in Exhibit D hereto;
(ii) any unfiled lien of materialmen, mechanics,
workmen, warehousemen, carriers, landlords or repairmen;
provided that if such a lien shall be perfected and shall not be
contested in good faith, it shall be discharged of record
immediately by payment, bond or otherwise;
(iii) tax liens which are being contested in good
faith, or which constitute liens for taxes the payment of which
is not yet required;
(iv) liens in favor of the Bank; and
(v) liens incurred in connection with the purchase
money indebtedness permitted under Section 11.1(a)(iv);
(c) sell, lease, transfer or otherwise dispose of any of its
properties and assets to any Person other than sales in any fiscal year
of obsolete machinery and equipment in the ordinary course of business
having an aggregate net book value of less than $100,000.00;
(d) enter into any agreement, directly or indirectly, with
any Person whereby the Borrower shall sell or transfer any property,
real or personal, whether now owned or hereafter acquired, and used or
useful in its business, and thereafter rent or lease such property or
other property which the
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<PAGE> 16
Borrower intends to use for substantially the same purpose or purposes
as the property being sold or transferred;
(e) seek or permit dissolution or liquidation of the
Borrower in whole or in part;
(f) guaranty, or become liable for, the obligations of any
other Person (provided, however, this shall not prevent the Borrower
from endorsing negotiable instruments for collections in the ordinary
course of business);
(g) make any loans or advances to any Person; provided,
however, the Borrower may make temporary loans or advances to employees
expected to be incurred in the ordinary course of business provided
such loans and advances do not exceed $100,000.00 in the aggregate at
any time outstanding;
(h) consolidate with, merge into, be acquired by or acquire
the assets or capital stock of any Person;
(i) without the prior consent of the Bank, create or permit
to exist any partnerships, joint ventures or make any substantial
investment other than as disclosed herein and permitted hereunder;
(j) purchase, own, invest in or otherwise acquire, directly
or indirectly, any stock or other securities, or make or permit to
exist any investment, capital contribution or acquire any interest
whatsoever in any other Person or permit to exist any loans or advances
for such purposes provided, the Borrower may maintain investments in or
invest:
(i) in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the
United States of America; provided, that such obligations mature
one year from the date of acquisition thereof;
(ii) in certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or any
State thereof having capital surplus and undivided profits
aggregating at least $40 million and not known by the Borrower
to be having financial difficulties;
(iii) in commercial paper rated P-1 or better by
Moody's Investors Services, Inc. (Commercial Paper Record) or
A-1 or better by Standard & Poors; or
(iv) in equity securities with an aggregate cost of
not more than $100,000.00; or
(k) enter into or carry on any business other than the
manufacture of pharmaceutical-related products and services for the
pharmaceutical industry and the manufacture and sale of pharmaceutical
products.
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<PAGE> 17
ARTICLE XII
EVENTS OF DEFAULT AND ACCELERATION
12.1 Any of the following shall constitute an "Event of Default"
under this Loan Agreement:
(a) Nonpayment. Nonpayment when and as due of any
principal, interest or other payment hereunder or under any of the
Notes and the continuation of such nonpayment for a period of five (5)
days.
(b) Breach of Covenants. Other than as set forth in Section
12.1(a) hereof, the failure to perform and observe any covenant or
other obligation contained herein or in any other Loan Documents and
the continuation of such failure for a period of thirty (30) days after
receipt of written notice from the Bank thereof.
(c) False Statements. If any representation or warranty
made by the Borrower in this Loan Agreement, any other Loan Document or
in any document, certificate, statement or report heretofore or
hereafter made shall be untrue in any material respect.
(d) Bankruptcy. In the event that the Borrower or either
Guarantor
(1) shall make an assignment for the benefit of
creditors; or
(2) has a petition initiating a proceeding under any
section or chapter of the Bankruptcy Code or its amendments,
filed by or against the Borrower or either Guarantor and, if
against the Borrower or either Guarantor, such petition is not
set aside within ninety (90) days after such filing; or
(3) shall file any proceedings for dissolution or
liquidation; or
(4) has a receiver, trustee or custodian appointed
for all or part of its or his assets; or
(5) seeks to make an adjustment, settlement or
extension of its or his debts with its or his creditors
generally; or
(6) has a notice of an action for enforcement of a
lien filed or recorded or a judgment lien or execution obtained
against it or him in excess of an aggregate of $50,000.00 which
notice of lien is not removed, insured, reserved for (in amounts
satisfactory to the Bank), satisfied, bonded or contested in
good faith within thirty (30) days after any officer of the
Borrower or the applicable Guarantor, as the case may be,
becomes aware of such lien;
(e) if an event of default occurs under any agreement by and
between the Borrower and the Bank which is in existence as of the date
hereof (including the Reimbursement Agreement dated as of November 1,
1988, as amended, by and between the Borrower and the Bank) or which is
entered into subsequent to the date hereof;
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<PAGE> 18
(f) if the Borrower in the performance of any other
agreement between it and any other lender defaults and such default
permits such other lender to accelerate such other indebtedness of the
Borrower for borrowed money;
(g) the Guarantors shall at any time cease or fail to own in
the aggregate 51% or more of the voting stock of the Borrower; or
(h) either Guarantor shall default in the performance of any
obligation under the Guaranty Agreement.
12.2 Remedies. Upon the occurrence of any such Event of Default and
after the applicable grace period, if any, and unless the Bank agrees to waive
in writing such an Event of Default:
(a) Termination of Commitment. The Bank, in its sole
discretion, may terminate the Commitment.
(b) Acceleration of Indebtedness. All of the indebtedness
of any and every kind owing by the Borrower to the Bank, howsoever
evidenced, now existing or hereafter arising, shall become due and
payable upon written notice to the Borrower (other than an Event of
Default described in Section 12.1(d) in which case such indebtedness
shall become due and payable immediately without necessity of written
demand) without the necessity of any other demand, presentment, protest
or notice upon the Borrower, all of which are hereby expressly waived
by the Borrower.
(c) Acceleration of Obligations. All of the obligations of
the Borrower under the Loan Documents shall thereupon be immediately
due and payable without the necessity of any other demand, presentment,
protest or notice upon the Borrower, all of which are hereby expressly
waived by the Borrower.
(d) Right of Set-Off. Regardless of the adequacy of the
collateral, the Bank shall have the right, immediately and without
further action by it, to set-off against the Notes, all money owed by
the Bank in any capacity to the Borrower, whether or not due, and the
Bank shall be deemed to have exercised such right of set-off and to
have made a charge against any such money immediately upon the
occurrence of such event of default even though such charge is made or
entered on the books of the Bank subsequent thereto.
(e) Foreclosure. The Bank may cause foreclosure upon any
collateral as authorized in the Loan Documents in order to satisfy all
obligations of the Borrower to the Bank under and pursuant to all of
the rights and powers and in the manner contained in the Loan
Documents. The Borrower hereby agrees that the Bank shall have the
right to bid and become a purchaser on its own behalf in any such
sales.
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<PAGE> 19
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices and other communications hereunder shall
be sufficiently given and shall be deemed given when delivered or when mailed
by registered or certified mail, postage prepaid, addressed as follows:
(a) if to the Borrower:
Applied Analytical Industries, Inc.
1206 North 23rd Street
Wilmington, North Carolina 28405
Attention: Frederick D. Sancilio
(b) if to the Bank
NationsBank of North Carolina, N.A.
155 North Front Street
Wilmington, North Carolina 28401
Attention: Teresa D. Andrews
13.2 Waiver. No failure or delay on the part of the Bank in the
exercise of any right, power or privilege hereunder or under any other Loan
Document shall operate as a waiver of any such right, power or privilege nor
shall any such failure or delay preclude any other or further exercise thereof.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
13.3 Survival. All covenants, agreements, representations and
warranties made herein and in the other Loan Documents shall survive the making
by the Bank of the Loans and the execution and delivery to the Bank of the Loan
Documents and shall continue in full force and effect so long as any of the
indebtedness of the Borrower to the Bank evidenced by the Notes or any
obligations under the Commitment remain outstanding.
13.4 Successors and Assigns. This Loan Agreement and the Loan
Documents shall inure to the benefit of and be binding upon successors and
assigns of the Bank; provided, however, the Borrower shall not assign any of
its rights or obligations hereunder without the prior written consent of the
Bank.
13.5 Costs. The Borrower agrees to pay all reasonable costs and
expenses in connection with the preparation, execution and delivery of the Loan
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of Moore & Van Allen, special counsel to the Bank, and costs and
expenses of the Bank in connection with the implementation and/or enforcement
of this Loan Agreement or the other Loan Documents (including without
limitation reasonable attorneys fees) and to hold the Bank harmless from any
and all such costs, expenses and liabilities.
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<PAGE> 20
13.6 Amendment; Waiver; Consents. No approval, decision, option or
action required of the Bank ("Approval") hereunder nor any modification,
amendment or waiver ("Waiver") of any provision of this Loan Agreement or any
other Loan Document nor any consent to any departure by the Borrower therefrom
("Consent") shall in any event be effective unless the same shall be in writing
signed by the Bank and delivered in accordance with the provisions of Section
13.1 hereof, and then such Approval, Waiver or Consent shall be effective only
in the specific instance and for the purpose for which given but any such
Approval, Waiver or Consent when signed shall be effective and binding upon the
Bank. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
13.7 Year. Except as otherwise provided for hereunder, interest,
fees and premiums hereunder shall be computed on the basis of a three hundred
sixty (360) day year for the actual number of days in the billing period.
13.8 Payment on Business Day. Should any installment or other
payment of the principal of or interest on the Notes become due and payable on
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day thereafter and in the case of an installment of
principal, interest shall be payable thereon at the rate per annum herein
specified during such extension.
13.9 Counterparts. This Loan Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed
an original, and it shall not be necessary in making proof of this Loan
Agreement to produce or account for more than one such counterpart.
13.10 Assignment. The Bank may, at any time, transfer or assign all
or any portion of the indebtedness evidenced by the Notes held by the Bank and
the terms hereof shall extend to any subsequent holder of the Notes.
13.11 Term. The term of this Loan Agreement shall be until the Bank
is no longer obligated to lend under the Commitment and the Bank has received
payment in full of the unpaid principal and interest of the Notes.
13.12 Captions. The captions herein are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Loan Agreement nor the interest of any provisions hereof.
13.13 Governing Law. This Loan Agreement and the other Loan Documents
and all matters relating thereto shall be governed by and construed and
interpreted in accordance with the laws of the State of North Carolina. The
Borrower hereby submits to the jurisdiction and venue of the state and federal
courts of North Carolina and agrees that the Bank may, at its option, enforce
its rights under the Loan Documents in such courts. The Borrower hereby agrees
that both the federal and state courts in Mecklenburg County, North Carolina
are a convenient forum and agrees not to raise as a defense that such courts
are not a convenient forum.
13.14 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY WAIVE
THE RIGHT TO JURY TRIAL IN ANY ACTION, SUIT OR PROCEEDING ARISING FROM OR
RELATED TO THIS LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed or caused this
instrument to be executed under seal as of the day and year first above
written.
APPLIED ANALYTICAL INDUSTRIES,
INC.
ATTEST:
By /s/ R. Forrest Waldon By /s/ Frederick D. Sancilio
----------------------------- ------------------------------
Title Secretary Title President
(Corporate Seal)
NATIONSBANK OF NORTH CAROLINA,
N.A.
By /s/ Teresa D. Andrews
--------------------------------
Title Vice President
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<PAGE> 22
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated as of May 17, 1994 by
and between
APPLIED ANALYTICAL INDUSTRIES, INC., a corporation organized and
existing under the laws of the State of Delaware and having its principal place
of business in Wilmington, North Carolina (the "Borrower"); and
NATIONSBANK OF NORTH CAROLINA, N.A., a national banking association
organized and existing under the laws of the United States and having offices
in Wilmington, North Carolina (the "Bank").
RECITALS
A. The Bank and the Borrower have entered into that certain Loan
Agreement, dated as of December 21, 1992 (the "Loan Agreement").
B. The Bank and the Borrower have agreed to make changes to the
Loan Agreement as provided for herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Loan Agreement is hereby amended as follows:
(a) The definition of "Capital Expenditures Loan Maturity
Date" in Section 1.01 is amended in its entirety so that such definition now
reads as follows:
"Capital Expenditures Loan Maturity Date" means May 31, 1995;
(b) The definition of "Cash Flow" in Section 1.01 is
amended in its entirety so that such definition now reads as follows:
"Cash Flow" means, for the twelve (12) month period ending on
the date of computation: net income of the Borrower (i) plus
depreciation, amortization and other non-cash charges, and (ii) minus
dividends declared or paid or redemptions of stock or other
distributions of cash or property to shareholders of the Borrower;
(c) The definition of "Revolving Loan Maturity Date" in
Section 1.01 is amended in its entirety so that such definition now reads as
follows:
"Revolving Loan Maturity Date" means May 31, 1995;
(d) Section 2.01 is amended in its entirety so that such
Section now reads as follows:
2.01 Revolving Loans. Subject to the terms and conditions
and relying upon the representations and warranties herein set forth,
the Bank agrees to make Revolving Loans to the Borrower, at any time
or from time to time on or after the date hereof and until the
Revolving Loan Maturity Date, in an aggregate principal amount at any
time outstanding not to exceed FIVE MILLION DOLLARS ($5,000,000.00)
(the "Revolving
<PAGE> 23
Loan Committed Amount") for purposes of financing the Borrower's
working capital needs. The Borrower may borrow, repay and reborrow
hereunder on or after the date hereof and prior to the Revolving Loan
Maturity Date, subject to the terms, provisions and limitations set
forth herein.
(e) Section 2.02 is amended by deleting the first
sentence thereto and replacing it with the following sentence:
The Revolving Loans by the Bank shall be evidenced by the
Revolving Note duly executed by the Borrower, dated May 17, 1994,
payable to the order of the Bank in a principal amount equal to the
Revolving Loan Committed Amount.
(f) Section 2.03 is amended by deleting the first
sentence thereto and replacing it with the following sentence:
The outstanding principal balance of the Revolving Loans shall
bear interest at a rate equal to the Prime Rate plus one-half percent
(1/2%) per annum.
(g) Section 2.06 is added to the Loan Agreement as
follows:
2.06 Unused Fee. In consideration of the Bank's
commitment to make the Revolving Loans, the Borrower agrees to pay an
unused fee of one-quarter of one percent (1/4%) per annum (computed on
the basis of the actual number of days elapsed in a year of 360 days)
on the average daily Unutilized Commitment during the preceding period
(for purposes hereof, the term "Unutilized Commitment" shall mean, at
any time the excess of the Revolving Loan Committed Amount at such
time over the aggregate principal amount of the Revolving Loans
outstanding at such time. This unused fee shall be payable on the
tenth day of each calendar quarter computed for the immediately
preceding calendar quarter. This unused fee shall continue until the
Revolving Loan Maturity Date or until the commitment of the Bank to
make Revolving Loans hereunder is terminated.
(h) Section 10.01(c) is amended in its entirety so that
such Section now reads as follows:
(c) deliver a report (i) on the 15th day of each month
substantially in the form of Exhibit F-1 on the Borrowing Base and its
components as of the 30th day of the prior month and (ii) on the 30th
day of each month substantially in the form of Exhibit F-1 on the
Borrowing Base and its components as of the 15th day of such month;
(i) Section 10.01(q) is amended in its entirety so that
such Section now reads as follows:
(q) satisfy the following financial tests (all computed
using historical cost basis statements):
(i) the Borrower will maintain as of the end of
each fiscal quarter (commencing with the fiscal quarter ending
December 31, 1993) a Capital Base of not less than
$4,750,000.00; provided, however, such amount shall be
increased on the last day of each
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<PAGE> 24
fiscal year (commencing with the fiscal year ending December
31, 1994) by an amount equal to $1,600,000.00, such increases
to be cumulative;
(ii) the Borrower shall maintain at all times a
Current Ratio of not less than 1.00 to 1.00;
(iii) the Borrower shall maintain a Coverage Ratio
of not less than 1.50 to 1.0 computed on the last day of each
fiscal quarter commencing with the fiscal quarter ending June
30, 1994; and
(iv) the Borrower shall maintain a ratio of Total
Liabilities less Subordinated Debt to Capital Base of not
greater than (A) 2.75 to 1.0 at all times during the period
commencing on May 17, 1994 through and including December 31,
1994, (B) 2.5 to 1.0 at all times during the period commencing
on January 1, 1995 through and including December 31, 1995 and
(C) 2.0 to 1.0 at all times thereafter.
(j) Section 11.01(g) is amended in its entirety so that
such Section now reads as follows:
(g) make any loans or advances to any employees,
directors, shareholders, subsidiaries or affiliates in excess of
$100,000.00 at any time outstanding;
(k) Section 11.01(k) is amended by deleting the period at
the end of such Section and adding a semicolon followed by the word "or".
(l) Sections 11.01(l) and (m) are added as follows:
(l)(i) purchase, redeem or retire any of its stock; or (ii)
pay any dividends or other distributions to its shareholders other
than (A) dividends in an amount equal to 100% of the actual tax
liability incurred by the shareholders of the Borrower on account of
income of the Borrower for fiscal year 1994, (B) dividends in an
amount equal to 120% of the actual tax liability incurred by the
shareholders of the Borrower on account of income of the Borrower for
fiscal year 1995 and (C) dividends in an amount equal to 130% of the
actual tax liability incurred by the shareholders of the Borrower on
account of income of the Borrower for fiscal year 1996 and each fiscal
year thereafter; or
(m) make unfinanced capital expenditures in excess of
$2,500,000.00 in fiscal year 1994, $3,000,000.00 in fiscal year 1995
and $4,000,000.00 in fiscal year 1996 and thereafter (computed on a
non-cumulative basis).
(m) Section 11.02 is added to the Loan Agreement as
follows:
11.02 Notwithstanding anything to the contrary contained in
Section 11.01, the Borrower may invest in GenerEst so long as the
aggregate amount of cash loaned by the Borrower to GenerEst or
invested by the Borrower in GenerEst shall not exceed $500,000.00.
(n) Exhibit A is deleted.
(o) Exhibit F is deleted and replaced with Exhibit F-1
attached hereto.
- 3 -
<PAGE> 25
C. The Borrower hereby represents and warrants that:
1. the "Representation and Warranties" set forth in Article IX of
the Loan Agreement, as amended, are true and correct as of the date of this
First Amendment;
2. the Borrower is not in default of the Loan Agreement or the
other Loan Documents (as defined in the Loan Agreement) and no event or
condition exists under the Loan Agreement or the other Loan Documents that, but
for the giving of notice or lapse of time or both, would result in such a
default as of the date of this First Amendment.
D. Except as modified hereby, all of the terms and provisions of
the Loan Agreement (and Exhibits) remain in full force and effect.
E. This First Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original.
F. This First Amendment and the Loan Agreement, as amended
hereby, shall be deemed to be contracts made under, and for all purposes shall
be construed in accordance with, the laws of the State of North Carolina.
- 4 -
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their duly authorized corporate officers as of the
day and year first above written.
APPLIED ANALYTICAL INDUSTRIES, INC.
ATTEST:
By: /s/ R. Forrest Waldon By: /s/ Frederick D. Sancilio
---------------------------------- ---------------------------------
Title: Secretary Title: President
------------------------------- ---------------------------------
(Corporate Seal)
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Mary J. Rogers
---------------------------------
Title: Assistant Vice President
---------------------------------
Each of the undersigned guarantors hereby consents to the foregoing in their
capacities as guarantors.
(SEAL)
/s/ R. Forrest Waldon /s/ Frederick D. Sancilio
- -------------------------------- ----------------------------------
Witness Frederick D. Sancilio
(SEAL)
/s/ Richard Bennett /s/ James L. Waters
- -------------------------------- ----------------------------------
Witness James L. Waters
- 5 -
<PAGE> 27
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of March 28, 1996 by
and between
APPLIED ANALYTICAL INDUSTRIES, INC., a corporation organized and
existing under the laws of the State of Delaware and having its principal place
of business in Wilmington, North Carolina (the "Borrower"); and
NATIONSBANK, N.A., a national banking association organized and
existing under the laws of the United States and having offices in Wilmington,
North Carolina (the "Bank").
RECITALS
A. The Bank and the Borrower have entered into that certain Loan
Agreement, dated as of December 21, 1992, as amended (the "Loan Agreement").
B. The Bank and the Borrower have agreed to make changes to the
Loan Agreement as provided for herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Loan Agreement is hereby amended as follows:
(a) Section 1.01 is amended by deleting the definitions
of "Aircraft Loan", "Aircraft Note", "Aircraft Security Agreement",
"Autoborrowing Documentation", "Autoborrowing Loans", Autoborrowing Note",
"Capital Expenditures Loan Committed Amount", "Guarantors" and "Guaranty
Agreements".
(b) The definitions of "Capital Expenditures Loan",
"Capital Expenditures Note" and "Capital Expenditures Loan Maturity Date" in
Section 1.01 is amended in their entirety so that such definitions now read as
follows:
"Capital Expenditures Loan" shall have the meaning given to
such term in Section 4.01 hereof;
"Capital Expenditures Note" shall have the meaning to given to
such term in Section 4.02 hereof;
"Capital Expenditures Loan Maturity Date" means December 31,
2000;
(c) The definition of "Loan" and "Loans" in Section 1.01 is
amended in its entirety so that such Section now reads as follows:
"Loan" or "Loans" means, the loans made pursuant to Sections
2.01, 3.01, 4.01 and 6.01 hereof;
<PAGE> 28
(d) The definition of "Note" and "Notes" in Section 1.01 is
amended in its entirety so that such Section now reads as follows:
"Note" or "Notes" means, the promissory notes of the Borrower
executed and delivered as provided in Sections 2.02, 3.02, 4.02 and
6.01 hereof;
(e) The definition of "Receivables Base" is amended in its
entirety so that such definition now reads as follows:
"Receivables Base" means an amount equal to the aggregate book
value of all billed receivables of the Borrower from the sale of
inventory or the rendering of services (excluding in any case
receivables in excess of $1,000,000 in the aggregate owed by any
entities in which the Borrower has any ownership in or participates in
any earnings from) which are no more than 90 days after the invoice
date; provided, that in no event shall any receivable be included in
the Receivable Base unless such receivable is free and clear of all
liens and encumbrances, except liens and encumbrances permitted
hereunder;
(f) The definition of "Revolving Loan Maturity Date" in Section
1.01 is amended in its entirety so that such definition now reads as follows:
"Revolving Loan Maturity Date" means May 31, 1996;
(g) Section 1.01 is further amended by adding the following
definitions thereto in the alphabetically appropriate places:
"Applicable Margin" means the following interest rate spreads
determined as follows:
<TABLE>
<S> <C>
Total Liabilities/Tangible Net Worth Interest Rate Spread
less than or equal to .50 to 1.0 100 basis points
equal to or greater than .51 to 1.0 but less than 1.0 to 1.0 135 basis points
greater than or equal to 1.0 to 1.0 170 basis points
</TABLE>
"LIBOR Rate" means the floating 30 day London Interbank
Offering Rate as published in the Wall Street Journal from time to
time.
"Working Capital" means the amount by which Current Assets
exceeds Current Liabilities.
(h) Article II is amended in its entirety so that such Article now
reads as follows:
ARTICLE II
Revolving Loans
2.01 Revolving Loans. Subject to the terms and
conditions and relying upon the representations and warranties
herein set forth, the Bank agrees to make Revolving Loans to
the Borrower, at any time or from time to time on or after the
date hereof and until the
- 2 -
<PAGE> 29
Revolving Loan Maturity Date, in an aggregate principal amount
at any time outstanding not to exceed FIVE MILLION DOLLARS
($5,000,000.00) (the "Revolving Loan Committed Amount") for
purposes of financing the Borrower's working capital needs.
The Borrower may borrow, repay and reborrow hereunder on or
after the date hereof and prior to the Revolving Loan Maturity
Date, subject to the terms, provisions and limitations set
forth herein.
2.02 Revolving Note. The Revolving Loans by the
Bank shall be evidenced by the Revolving Note duly executed by
the Borrower, dated the Closing Date, in substantially the
form of Exhibit A attached hereto, payable to the order of the
Bank in a principal amount equal to the Revolving Loan
Committed Amount. The Revolving Note shall bear interest from
its date on the outstanding principal balance thereof as set
forth in Section 2.03 hereof. The aggregate unpaid principal
amount of the Revolving Loans at any time shall be the
principal amount owing on the Revolving Note at such time.
The principal amount of the Revolving Loans, as evidenced by
the Revolving Note, shall be payable on the Revolving Loan
Maturity Date and all accrued and unpaid interest thereon,
shall, subject to the provisions hereof, be payable monthly in
arrears on the tenth day of each month commencing May 10, 1996.
2.03 Interest. Effective November 15, 1995, the
outstanding principal balance of the Revolving Loans shall
bear interest at a rate equal to the LIBOR Rate plus the
Applicable Margin.
2.04 Borrowing Base Limitation.
(a) The principal amount of the Revolving Loans
outstanding under this Article II at any time shall not exceed
the Borrowing Base.
(b) If at any time the outstanding principal
balance of the Revolving Loans exceeds the Borrowing Base, the
Borrower shall immediately pay the Bank an amount equal to
such excess.
2.05 Unused Fee. In consideration of the Bank's
commitment to make the Revolving Loans, the Borrower agrees to
pay an unused fee of one-fifth of one percent (1/5%) per annum
(computed on the basis of the actual number of days elapsed in
a year of 360 days) on the average daily Unutilized Commitment
during the preceding period (for purposes hereof, the term
"Unutilized Commitment" shall mean, at any time the excess of
the Revolving Loan Committed Amount at such time over the
aggregate principal amount of the Revolving Loans outstanding
at such time. This unused fee shall be payable on the tenth
day of each calendar quarter computed for the immediately
preceding calendar quarter. This unused fee shall continue
until the Revolving Loan Maturity Date or until the commitment
of the Bank to make Revolving Loans hereunder is terminated.
(i) Section 3.03 is amended in its entirety so that such Section
now reads as follows:
- 3 -
<PAGE> 30
3.03 Interest. Effective November 15, 1995, the
outstanding principal balance of the Term Loans shall bear
interest at a rate equal to the LIBOR Rate plus the Applicable
Margin.
(j) Article IV shall be amended in its entirety so that such
Article now reads as follows:
ARTICLE IV
Capital Expenditures Loan
4.01 Capital Expenditures Loan. The Bank has
previously made a capital expenditures loan to the Borrower
(the "Capital Expenditures Loan") the outstanding principal
balance of which as of March 28, 1996 is $998,000.00.
4.02 Capital Expenditures Note. The Capital
Expenditures Loan shall be evidenced by the promissory note,
dated March 28, 1996, executed by the Borrower in favor of the
Bank in the original prinicipal amount of $998,000.00 (the
"Capital Expenditures Note"). The Capital Expenditures Note
shall bear interest from its date on the outstanding principal
balance thereof as set forth in Section 4.03 hereof. The
principal amount of the Capital Expenditures Loan, as
evidenced by the Capital Expenditures Note, shall be payable
in sixty consecutive monthly installments, the first 59 of
which shall be in an amount equal to $16,663.00 and the 60th
of which shall be in an amount equal to the then outstanding
principal balance of the Capital Expenditures Loan. Such
installments shall be due and payable on the 28th day of each
month commencing April 28, 1996. All accrued and unpaid
interest on the Capital Expenditures Note shall, subject to
the provisions hereof, be payable monthly in arrears on the
28th day of each month commencing April 28, 1996.
4.03 Interest. Effective November 15, 1995, the
outstanding principal balance of the Capital Expenditures Loan
shall bear interest at a rate equal to the LIBOR Rate plus the
Applicable Margin.
(k) Article V is deleted.
(l) Sections 9.05 and 9.10 are amended in their entirety so that
such Sections now read as follows:
9.05 Litigation. There are no material pending,
or to the best knowledge of the Borrower, threatened, legal
proceedings to which the Borrower is a party or of which any
of its properties are the subject other than the Kurtzman
judgment of $363,000 plus interest from June, 1995.
9.10 Subsidiaries. The Borrower has no
Subsidiaries as of March 28, 1996 except for Applied
Analytical Industries Italy S.r.l. in Milan, Italy and AAI
Learning Center.
(m) Section 10.01(b) is amended in its entirety so that such
Section now reads as follows:
- 4 -
<PAGE> 31
(b) within thirty (30) days after the end of each
quarter of each fiscal year, deliver financial information and
reports as of the end of such quarter (including financial
statements, receivables agings and payables agings) of the
Borrower certified by the chief financial officer of the
Borrower to be correct and accurate;
(m) Section 10.01(q)(iv) is amended in its entirety so
that such Section now reads as follows:
(iv) the Borrower shall maintain a ratio
of Total Liabilities to Tangible Net Worth not
greater than 1.25 to 1.0 at all times;
(n) Section 10.01(q) is further amended by adding the following
subsection (v) thereto:
(v) the Borrower shall maintain as of
the end of each fiscal quarter Working Capital of at
least $2,000,000.00.
(o) Section 11.01(g) is amended in its entirety so that such
Section now reads as follows:
(g) make any loans or advances to any employees,
directors, shareholders, subsidiaries or affiliates in excess
of $250,000.00 at any time outstanding other than such loans
or advances made pursuant to agreements existing as of March
28, 1996 or such loans or advances made in the normal course
of business (on an arm's length basis);
(p) Section 11.01(l) is amended in its entirety so that such
Section now reads as follows:
(l)(i) purchase, redeem or retire any of its stock
(other than redemptions or repurchases or stock as part of any
employee benefit plan so long as the aggregate amount of such
redemptions and repurchases does not exceed $500,000.00); or
(ii) pay any dividends or other distributions to its
shareholders in excess of $100,000.00 per fiscal year;
(q) Exhibit D to the Loan Agreement is amended by adding thereto
the liens and encumbrances described on Exhibit D-1 attached hereto.
2. The Bank hereby agrees to release Frederick D. Sancilio and
James L. Waters from all of their respective obligations under all guarantees
previously executed by them with respect to the transactions evidenced by the
Loan Agreement.
3. The Borrower hereby represents and warrants that:
a. the "Representation and Warranties" set forth in
Article IX of the Loan Agreement, as amended, are true and correct as
of the date of this Second Amendment;
b. the Borrower is not in default of the Loan Agreement
or the other Loan Documents (as defined in the Loan Agreement) and no
event or condition exists under the Loan Agreement or the other Loan
Documents that, but for the giving of notice or lapse of time or both,
would result in such a default as of the date of this Second
Amendment.
- 5 -
<PAGE> 32
4. Except as modified hereby, all of the terms and provisions of
the Loan Agreement (and Exhibits) remain in full force and effect.
5. This Second Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original.
6. This Second Amendment and the Loan Agreement, as amended
hereby, shall be deemed to be contracts made under, and for all purposes shall
be construed in accordance with, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their duly authorized corporate officers as of the
day and year first above written.
APPLIED ANALYTICAL INDUSTRIES, INC.
ATTEST:
By: /s/ R. Forrest Waldon By: /s/ Frederick D. Sancilio
---------------------------------- ---------------------------------
Title: Secretary Title: President
------------------------------- ---------------------------------
NATIONSBANK, N.A.
By: /s/ Mary J. Rogers
---------------------------------
Title: Assistant Vice President
---------------------------------
- 6 -
<PAGE> 33
NationsBank of North Carolina, N.A.
P.O. Box 1290
Wilmington, NC 28402-1290
Tel 919 763-9951
Fax 919 251-5317
NationsBank
June 3, 1996
Mr. Charlie Deignan
Applied Analytical Industries, Inc.
5051 New Centre Drive
Wilmington, North Carolina 28403
Dear Mr. Deignan:
NationsBank, N.A. has agreed to extend the maturity date of revolving notes 455
and 497 from May 31, 1996 for 90 days to August 31, 1996 in order to have time
to approximately review AAI's 1995 audited statements upon receipt.
If you have any questions regarding this extension, please do not hesitate to
contact me.
Sincerely,
/s/ Caroline Parris
- ----------------------------
Caroline Parris
Commercial Loan Officer
<PAGE> 34
ESTOPPEL AND MODIFICATION AGREEMENT
We hereby certify that the note of APPLIED ANALYTICAL INDUSTRIES, INC. to
NationsBank, N.A. (Carolinas) now known as NationsBank, N.A. dated May 31,
1995, in the original amount of $3,000,000.00, secured by Accounts Receivable &
Inventory, is a valid and subsisting obligation of the undersigned maker(s) to
the extent of $Zero Balance, the balance of the principal due thereon, with
interest from and after May 3, 1996; that there are no defenses or offsets
against the same and that the maturity and time of payment of the balance due
on said note has been modified with the consent of the undersigned so that the
remainder of the principal and interest will be due in the following manner:
Maturity date is extended to August 31, 1996.
All other terms and conditions remain the same.
WITNESS my/our hand(s) and seals this 3 day of June, 1996.
(SEAL)
By: /s/ Mark P. Colonnese
----------------------------------------------
Mark P. Colonnese, Vice President and Treasurer
(SEAL)
--------------------------------------------
<PAGE> 35
ESTOPPEL AND MODIFICATION AGREEMENT
We hereby certify that the note of APPLIED ANALYTICAL INDUSTRIES, INC. to
NationsBank, N.A. (Carolinas) now known as NationsBank, N.A. dated May 31,
1995, in the original amount of $2,000,000.00, secured by Accounts Receivable &
Inventory, is a valid and subsisting obligation of the undersigned maker(s) to
the extent of $Zero Balance, the balance of the principal due thereon, with
interest from and after May 21, 1996; that there are no defenses or offsets
against the same and that the maturity and time of payment of the balance due
on said note has been modified with the consent of the undersigned so that the
remainder of the principal and interest will be due in the following manner:
Maturity date is extended to August 31, 1996.
All other terms and conditions remain the same.
WITNESS my/our hand(s) and seals this 3 day of June, 1996.
(SEAL)
By: /s/ Mark P. Colonnese
----------------------------------------------
Mark P. Colonnese, Vice President and Treasurer
(SEAL)
--------------------------------------------